A Paddocks Sectional Title Lifestyle Blog
By Jennifer Paddock
The situation with ordinary/general levies is straightforward as it is catered for the Sectional Titles Act (the Act).
Once the trustees have raised an ordinary levy, a new owner becomes liable for the pro-rata payment of the levy from the date on which ownership changes.
To illustrate what this means in practice I’ll give you an example.
Say the ordinary levies are raised from January to December. Transfer of the unit takes place on 15th May. The seller is liable for levies up until 14th May and the buyer is then responsible for the levies from 15th May onwards.
When it comes to special levies there is no provision in the Act catering for change of ownership and therefore it is not as straightforward.
The Act simply provides that the person who is the registered owner of a unit on the date that the trustees raise a special levy is liable to pay it. The problem is that special levies are often raised and made payable over a long period of time and in a number of instalments and during this time ownership of one, or even a number of units, changes hands.
So in order to determine who is legally responsible to pay a special levy the question that you need to ask is:
Who was the registered owner on the date the trustees passed the resolution raising the special levy?
If it was the seller – the seller is liable for all instalments related to that special levy despite the fact that the instalments may continue after they are long gone and they may well not be around to benefit from whatever that money is spent on. It is therefore recommended that the seller factor the quantum of the special levy into their unit’s sale price and pay their special levy contribution off in a lump sum prior to their exit from the scheme.
There is another option whereby the seller can cede responsibility for the remaining special levy instalments to the buyer, but because the body corporate is the party to whom the money is owed, this would need to be arranged via a tri-partite agreement to which the seller, buyer and the body corporate are all parties.
If it was the buyer – then the buyer is responsible to pay for the special levy despite the fact that it could have been raised within days of him becoming the new owner and that he was not involved in any lead-up discussions or decisions relating to raising this amount.
I have also written a blog post about how special levies are raised and the requirements for doing so, which you can read here.
We’d love to hear your experience on how this works in practice. Please share with us by commenting below.
Image source: echo-ca.org